Michigan Economic Development Corporation Expects Tremendous Return from Creation of Two New Early Stage Venture Capital Funds

Arboretum and Accelero Funds Target Life Sciences Startups

The Michigan Economic Development Corporation (MEDC) today announced that it has awarded $600,000 to two new seed and early stage venture capital funds as a means to help entrepreneurial capital flow to companies in early development.

The grants will help launch new funds managed by Arboretum Ventures and Accelero Capital Partners.

“There is an abundance of quality research coming out of Michigan’s universities, yet the number of new companies being created around that research is relatively low,” said Doug Rothwell, president and CEO of the Michigan Economic Development Corporation.“The creation of these new funds will provide more venture capital aimed at the seed and early growth stage of company development, which is so needed in Michigan.”

Arboretum and Accelero have committed to raising $25 million and $20 million respectively to invest in companies in the life sciences and health care industries.The MEDC will accomplish two major goals with its support of the new funds: increasing the presence and impact of seed and early stage investment in the state and furthering the Michigan Life Sciences Corridor initiative.

Of the $128.7 million in venture capital received by Michigan companies in 2001, only $15.4 million, or 12 percent, went to seed and early stage companies, according to PricewaterhouseCoopers statistics.

Arboretum and Accelero both expect to raise their projected capital within approximately 18 months.

“In terms of leveraging our resources, we would be hard pressed to find a better ‘bang for the buck’ value than what we are accomplishing with these grants,” Rothwell said.“Our input of $600,000 is going to stimulate the creation of at least $45 million in new capital to help launch life sciences and health care companies.”

Arboretum and Accelero will each receive $300,000 from the Michigan Growth Capital Fund (MGCF).The MGCF was created from a one-time, $5 million legislative appropriation to encourage private and public investment in Michigan’s technology business sectors.

“Arboretum Ventures is focused on starting at least 12 new life science companies, and the MEDC’s grant will allow us to raise the $25 million we need to accomplish that goal,” said Jan Garfinkle, managing partner of Arboretum. “We will provide the next step to many of the technologies funded by the Michigan Life Sciences Corridor, and expect to contribute toward building a critical mass of successful life science companies in Michigan.”

Seed and early stage companies that will benefit from Arboretum and Accelero investments will typically use funds to help their businesses develop products and strengthen sales and marketing efforts.

“Despite the economic strength of Michigan companies and the incredible pool of talent, there is not enough capital to support their development,” said Rajesh Kothari, managing director of Accelero. “We are confident that Accelero can help fill that gap.”

Arboretum and Accelero were chosen by the MEDC after a competitive evaluation of 13 submitted proposals.Proposals were ranked on a number of criteria, including the managers’ experience in making investments in seed and early stage deals, participation of seed and early stage investors, the ability to nurture and shape the growth of portfolio companies, and the ability to transfer technology from Michigan universities into marketable products.

The Michigan Economic Development Corporation, a partnership between the state and local communities, promotes smart economic growth by developing strategies and providing services to create and retain good jobs and a high quality of life.